AVNEL GOLD MINING LIMITED (AVK: TSX) ANNOUNCES FIRST QUARTER 2011 RESULTS

Period ended March 31, 2011.

ST. PETER PORT, GUERNSEY, June 14, 2011 /CNW/ -

Exploration

SOMIKA

PROJECT MILESTONES ACHIEVED

  • Between January and April 2011, 11,592 metres of diamond drilling was completed at the Kalana Mine using two diamond drill rigs. The 2011 work program aims to complete 34,500 metres of drilling with a total budget of $8 million
  • In 2010, 13,164 metres of diamond drilling and 28,347 metres of reverse circulation drilling were completed at Kalana, Kalanako and Dabaran. All assay results, including re-assays from the first campaign between February and July 2010, have been received.
  • Expenditure in 2009 and 2010 totalled $6.4 million. By end 2011 IAMGOLD plans to have expended approximately $14.4 million, higher than the minimum $11 million required to be spent by August 2012 in terms of the Option Agreement.
  • Termite mound sampling on the 387sq.km Kalana permit has been completed. During 2010 approximately 21,000 samples were collected and assay results have been received. During 2011 approximately 4,000 additional samples were collected at priority targets and assay results are expected during the second quarter.
  • The main objective is to complete lines of drill holes spaced 50m apart across the Kalana 1 North domain and Kalana 1 South Domain to enable geological cross sections to be generated and a resource study to be completed during 2012. Two diamond drill rigs are working,  and a reverse circulation drill rig has been mobilised to site

Highlights

During 2010 and 2011 diamond drilling and RC drilling has shown the potential for bulk mining at Kalana. IAMGOLD has made significant progress in constructing a detailed and predictive geologic model on the Kalana project. The Kalana Project is described below in three domains, namely Kalana 1 North, Kalana 1 South and Kalana II. These three domains are located within the total Kalana project and can be considered as one potential mine.

Mineralised packages up to 18 metres width have been confirmed by drilling and underground development in the northern area of the Kalana Mine designated as Kalana I North.  Recent assay results from the 4th quarter diamond drill program shows extensive mineralised packages extending 250 metres north of No 2 shaft to a depth of 250m below surface across approximately 100m strike.

A new mineralised package of steep, thin, closely spaced veins has been exposed by diamond drilling and underground development between 100m and 250m elevations in this area. Assay results show that this mineralised package has several zones of elevated gold grades, generally associated with flat dipping quartz vein structures that crosscut the package.

North of the existing underground workings, vertical and flat dipping quartz veins have been intersected between surface and 100m elevation that may provide early access to bulk mineable ore within the saprolite zone.  The results of RC drilling confirm the possibility of these vein packages being an important source of gold mineralisation for an open pit in Kalana 1 North domain.

The diamond drill and RC assay results continue to demonstrate the potential for an open pit in the Kalana 1 South domain, running east-west over 300m and with a strike of at least 300m. During 2011 infill diamond drilling will increase the density of data to enable a mineral resource to be estimated early 2012.

Initial results from diamond and RC drill holes at Kalana II, east of the existing mine, are providing a better understanding of the potential mineralisation than previously interpreted. Assay results from the 2010 diamond and RC drilling at Kalana II have been received and show the excellent potential for mineralised packages that may lead to a major increase in the existing Mineral Resources at Kalana II.

Assay results from the 2010 RC drill holes at Kalanako, a satellite prospect located 3 kilometres north east of Kalana, are very encouraging.  The results indicate that at least two mineralised zones exist, striking north-west as indicated by the geochemical anomaly, artisanal workings and geophysical structures.

Fougadian Exploration Permit

On December 6, 2010 the Company announced that it had entered into a joint venture arrangements agreement (the "Joint Venture Arrangements Agreement") whereby IAMGOLD has the option to acquire up to an initial 51% interest in Avnel's 90% interest in the Fougadian Exploration Permit. The Fougadian Permit held by Avnel previously comprised 150 sq. km. to the south of and abutting the Kalana Exploitation Permit.  Avnel relinquished the southern half of its ground in accordance with the Malian Mining Code and was granted a new exploration licence on the northern half on March 23, 2010.  IAMGOLD has applied for and received an exploration permit in respect of the southern 75 sq. km. The combined permits are referred to as the "Fougadian Exploration Permit".

Under the terms of the Joint Venture Arrangements Agreement, IAMGOLD will fully fund and satisfy the expenditure requirements of the Fougadian Exploration Permit and, upon establishing a qualifying mineral resource of not less than 250,000 oz of gold, may earn a 51% interest (of Avnel's 90% interest) in the permit.  Upon delivery of a pre-feasibility study, IAMGOLD will be entitled to increase its interest to 65%.  After delivery of a feasibility study, IAMGOLD will undertake to procure or provide project financing to develop a mining operation.

During the first quarter 2011 approximately 6,000 termite mound samples were collected and submitted for sample preparation at the Kalana SGS sample preparation laboratory. The establishment of an exploration camp commenced during the quarter.

Results of Operations
Revenue decreased to $2,498,000 in the first quarter of 2011 from $3,582,000 in the first quarter of 2010. This was as a result of a decrease in gold ounces sold from 3,203 ounces in the first quarter of 2010 to 1,806 ounces in the first quarter of 2011 partly offset by the increase in the realised average sales price of gold from $1,116 per ounce in 2010 to $1,380 per ounce in 2011.

Avnel recorded a net loss of $1,525,000 ($0.007 loss per share) for the quarter ended March 31, 2011 compared to a net loss of $2,392,000 ($0.023 loss per share) in the comparative period in 2010.  The main contributing factor to the reduced loss in the period was an exchange profit of $49,000 compared to an exchange loss of $963,000 in the comparative period in 2010.

As compared to the balance sheet as at December 31, 2010, Avnel's cash and cash equivalents as at March 31, 2011 reduced by $1,498,000 from $2,106,000 to $608,000. On March 31, 2011 a private placement closed, the net proceeds of which $9,749,000 were not received until April 2011 and have therefore been shown as subscription receivable.

There was a working capital surplus of $12,249,000 as at March 31, 2011 compared to working capital deficit of $12,895,000 as at March 31, 2010. The increase mainly resulted from the debt equitisation and private placement in August 2010 and the March 31, 2011 private placement.

Total assets increased from $24,043,000 as at December 31, 2010 to $32,359,000 at March 31, 2011 due to the private placement on March 31, 2011.

Shareholders' equity also increased to $26,684,000 as at March 31, 2011 from $18,598,000 at the December 31, 2010. This was due to the private placement in March 31, 2011.  Additional Paid in Capital increased by $3,765,000 due to the warrants issued with the private placement on March 31, 2011 being fair valued at $3,700,000 and employee share options issued in the period valued at $65,000.  The retained deficit increased by $1,133,000 as a result of the net loss made in the first quarter of 2011.

Mining Operations
The following table shows the production from the Kalana Gold Mine:

      

  Three months ended
March 31  2011 2010
Tonnes milled.....................................................................................  11,126 13,753
Gold grade           - grams per tonne (g/t).............................................  6.1 8.4
Recovery rate       - %.........................................................................  82.4 86.0
Gold production    - ounces.................................................................. 1,953 3,160
     
Cost per tonne milled..........................................................................  $270 $228
Operating cost per ounce of gold sold................................................... $1,607 $782
Operating cost per ounce of gold produced............................................ $1,540 $980

Tonnes milled in the first quarter of 2011 were 19% lower than achieved in the first quarter of 2010. Gold production at 1,801 ounces in the first quarter of 2011 was 43% lower than the first quarter of 2010 resulting from the lower tonnes milled together with the lower head grade which reduced from 8.4g/t to 6.1g/t. During the quarter 152 ounces were recovered from the mill during the re-lining of the mill. Total gold production was 1,953 ounces.

The gold grade of underground ore mined of 6.1 g/t in the first quarter of 2011 was 27% lower than 8.4g/t obtained in the first quarter of 2010. The gold grade decreased as mining moved into lower grade reserve blocks but was in line with the plan.

Gold recovery in the first quarter of 2011 decreased to 82.4% from 86.0% as the head grade decreased.

Mine development totalled 453 metres in 2011 compared to 317 metres in 2010 and 166 metres ahead of the mine plan.  Ore development increased to 295 metres in 2011 from 210 metres in 2010 as new ore reserve blocks were opened up on 180m level. Exploration development advanced 70 metres as raises were mined to expose the mineralised package at Vein 17.

Development of a winze from 180m level North down to Vein 20 advanced 50m and 10m ore development was completed. The Vein 20 is well developed and mineralised. Development of this Vein is a high priority to expose at least 9,000 tonnes of mine planning reserves. Development of a winze from 180m level down to vein 18 advanced 37m before intersecting the Vein 18. 23m of ore development advanced east from the winze. The Vein 18 is a narrow channel (similar to the Vein mined above 180m level) and is well mineralised with initial grades slightly better than planned.

Operating cost of sales for the quarter of 2011 reduced 17% to $4,059,000 compared with $4,885,000 in the first quarter of 2010 due to lower labour cost and reduced activity. Cash operating cost of $270 per tonne milled in the first quarter of 2011 increased by 18% from the cost in the first quarter of 2010 of $228 per tonne due to lower throughput. Cash operating cost per ounce produced of $1,540 per ounce in the first quarter of 2011 increased from $980 per ounce in the first quarter of 2010 due to lower gold production.

Liquidity and going concern  
On March 31, 2011 the Company completed a private placement (the "2011 Private Placement") of 25,000,000 units of Avnel (the "Units") at a price of Cdn. $0.40 per Unit (the "Issue Price").  Each Unit consisted of one ordinary share of Avnel and one-half of one ordinary share purchase warrant (each whole warrant a "Warrant").  Each Warrant entitled the holder to purchase one ordinary share of Avnel at a price of C$0.70, at any time for a period of 18 months from the date of issue of the Warrants.  Dundee Securities Ltd. was the lead agent and the gross proceeds of the Private Placement were C$10,000,000 and Avnel intends to use these proceeds for general corporate purposes. The Company is debt free and has sufficient funds to meet its liabilities for the next 12 months.

The Company is currently in the middle of a significant exploration programme being performed by IAMGOLD under the terms of the August 2009 Option Agreement. The Company intends to sustain the current underground operation as long as economically feasible, without spending significant capital expenditure, until such time as the results of this exploration are completed and assessed to enable the Company to better evaluate future development options for the mine. Until this work is completed and a suitable development plan is identified, output from the mine will continue to be constrained.

The Annual Financial Statements and Annual Information Form are available on Sedar (www.sedar.com) and the Avnel Gold website (www.avnelgold.com).

ABOUT THE COMPANY

Avnel is a producing gold mining company operating the Kalana Mine in south-west Mali and is engaged in the exploration of the 30-year Kalana Exploitation Permit encompassing 387.4 sq km around and to the south of the Kalana Mine.

Avnel's principal asset is an 80% interest in Société d'Exploitation des Mines d'Or de Kalana ("SOMIKA") which is the holder of the Kalana Exploitation Permit.  The Kalana Project is situate in south west Mali.  The 387.4 sq km exploitation permit has a NI-43-101 compliant resource of 1,020,000 oz (at an average grade of 10.4 g/t) in the measured and indicated category, and 249,000 oz (at an average grade of 3.4 g/t) in the inferred category.  Avnel also holds the Fougadian Exploration Permit covering an area of 75 sq. km. to the south of the main Kalana Exploitation Permit area and abutting it.  Avnel and IAMGOLD Corporation have entered into a joint venture arrangements agreement whereby IAMGOLD has the option to acquire up to an initial 51% interest in Avnel's interest in the Fougadian Exploration Permit and in an additional 75 sq. kms to the south of Avnel's Fougadian Exploration Permit area for which IAMGOLD has applied for an exploration permit.

Technical Information and Qualified Person/Quality Control Notes
Information in this release arising subsequent to the date of the 2005 Snowden Technical Report regarding the Kalana Gold Mine and exploration activity is provided by Avnel management under the supervision of Roy Meade (a director of the Company) who is a non-independent "Qualified Person" as such term is defined in National Instrument 43-101. Portions of the information are based on assumptions, qualifications and procedures which are not fully described herein.

Forward-Looking Information
This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts are forward-looking statements. Although Avnel believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Avnel does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

SOURCE AVNEL GOLD MINING LTD.

For further information:

Howard Miller
Chief Executive Officer
Phone +44 207 589 9082; Fax +44 207 589 8507
UK Mobile : +44 07768 696129
Canadian Mobile : +1 416 726 8174
Email: howard@hbmiller.co.uk
www.avnelgold.com

Public Relations Consultant:
Ari Todd 
President
FronTier Consulting
1 King Street West - Suite 1411
Toronto, Canada
M5H 1A1
Direct   +1 416 800 9156
Mobile  +1 647 999 9734
E-Mail   atodd@consultwithfrontier.com
www.frontierconsultingltd.com

Profil de l'entreprise

AVNEL GOLD MINING LTD.

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